June 25, 2019
Mortgage rates were little-changed again today, despite moderate improvement in the broader bond market. Although it's MBS (the mortgage-backed securities that underlie mortgage loans) that have a direct effect on mortgage rates, the broader bond market--especially the 10yr Treasury yield--tends to move at the same time and by the same amount. With 10yr yields down 0.03% and mortgage rates unchanged, that clearly wasn't the case today. So what gives?
Again, mortgage rate movement is up to MBS. Sometimes MBS have better or worse days compared to Treasuries. Today was worse. The reasons are a bit complex, but suffice it to say that market volatility (and uncertainty about where rates may be in the coming weeks and months) is the ultimate culprit. Volatility has a much bigger effect on a mortgage compared to government bond due to the homeowner's ability to DECIDE to refinance or stay put. Those decisions affect MBS valuations, and MBS valuations affect mortgage rates.
The upside to this underperformance is that mortgage rates tend to fare much better at times like this when and if Treasury yields begin moving higher. Either way, rates are still in line with the lowest levels since late 2016.
Loan Originator Perspective
Bond markets rallied further today, despite some Fed "expectation tempering" rhetoric. The gains weren't huge, but every day we stay at multi-year lows is a win. I'm locking most loans closing within 30 days, floating most closing further out. As always, the biggest factor is client risk tolerance. It's not worth losing sleep over a floating rate! - Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.625% OR 3.875%*
- FHA/VA - 3.5-3.75%
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 3.625-4.125% depending on the lender
Ongoing Lock/Float Considerations
- Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general
- The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.
- Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
- Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.
*for most lenders, 3.75% is not priced competitively for complicated reasons surrounding the structure of the underlying market for mortgage-backed securities. It makes more sense for those lenders to quote 3.625% if they would otherwise be quoting 3.75%. They'll make more money that way and your payment will be lower. This is a temporary win/win that will go away once the secondary market adjusts to the new, lower rates (or once rates bounce higher... we'll hope it's the former).